People across America are pitched what seems like a win-win: make your house more climate-friendly for little or no money down. Advocates say it's a nightmare.

Leonard McBean had been told for months that his south Los Angeles home was a firetrap. Decades-old wiring had never been replaced, a common situation in his low-income neighborhood. One Tuesday morning, McBean asked a friend about the electrical contractor working on their house. By Wednesday night, the same contractor—a man who gave his name as Yogi—had approved the Jamaican immigrant for $18,000 in energy-efficient improvements.

“I said, ‘I don’t have that money,” McBean, a 67-year-old retired medical shuttle driver, told me. “He said, ‘Mr. McBean, don’t worry, you’re not going to pay a lot, just $100 a month.’ He said it was an Obama program.”

When McBean electronically signed the contract two years ago, he didn’t realize he was consenting to have a lien placed on his house, meaning the county could take the home away for lack of payment. He didn’t know the escrow payment attached to his mortgage would jump $400 a month. He didn’t know the lien would make the home difficult to sell.

“If I saw anybody with this intention, I would tell them no, don’t do it,” McBean said. “It’s going to be a nightmare for you, it’s going to be a rip-off.”

McBean was ensnared in a harmless-sounding program called Property Assessed Clean Energy (PACE), which helps people finance solar panels or energy-efficient windows with no money down. Homeowners pay through a surcharge assessed to property taxes, enjoying clean-energy upgrades that might otherwise be out of reach financially. And society benefits from more energy-efficient housing stock. “You can go solar right now,” President Obama, a longtime PACE booster, said last year. “And in the process, you can help America lead the world in the fight against climate change and for a cleaner, safer planet for our kids.”

“This is the next subprime crisis."—Anne Richardson. Public Counsel

But public-interest lawyers and housing advocates—some of whom are representing plaintiffs in civil suits over PACE financing—warn that aggressive salespeople dupe homeowners into high-cost projects they can’t afford. Victims complain of shoddy workmanship, overcharges, and add-ons that have little to do with clean energy. They often have no idea what they owe until receiving an exorbitant property tax bill. Lack of payment can lead to foreclosure. And it’s happening without oversight from the federal agency that’s supposed to protect consumers from financial scams—the one that recently got taken over by a top Trump official.

“This is the next subprime crisis,” said Anne Richardson of Los Angeles-based Public Counsel, the nation’s largest pro bono law firm. “It’s a frightening development.”

It’s easy to be fooled into thinking PACE is a government program. It’s not. The Obama administration blessed the concept, injected $150 million in stimulus funds for startup costs, and issued best practices guidelines through the Department of Energy in 2010, which were updated in 2016. But states and localities pass enacting legislation authorizing PACE, which private-sector businesses then run. “It uses the tax process, so it has the imprimatur of a government-sponsored program,” said John Rao, an attorney with the National Consumer Law Center.

The story usually begins with a phone call or a knock at the door. PACE providers—among the primary ones are Ygrene and Renovate America—use contractors as their sales force. Critics allege at least some contractors target low-income neighborhoods with high concentrations of seniors, minorities, and Spanish speakers. Maps on the Renovate America website show large numbers of PACE projects in places like South Central Los Angeles and the wealthier View Park-Windsor Hills area, known as the “black Beverly Hills.” Renovate America denies any targeting.

Homeowners usually sign up on tablets with an e-signature, without receiving hard copies or disclosure forms normally associated with a home loan.

Contractors, who are not licensed mortgage brokers, don’t have to check whether homeowners have the ability to repay. The only real requirement is that they have a good payment history and significant home equity, which companies can determine through a public records search. “They tell the contractors the maximum amount of eligibility for a client before they walk in,” said Alysson Snow, an attorney with the Legal Aid Society of San Diego, California. “It’s like walking into a car dealership and the dealer knows how much money is in your pocket.”

Amazingly, three public-interest lawyers told VICE they regularly receive solicitations themselves because they fit the demographic or live in low-income areas. “My first question is what’s your contractor license number and they hang up on me,” said Adelaide Anderson, an attorney with Public Counsel in Los Angeles.

Using hard-sell tactics promising increased home values, lower energy bills, and massive tax benefits, contractors approve tens of thousands of dollars in work in a couple hours, lawyers and homeowners allege. “They’re targeting a very vulnerable group with excellent salespeople who know how to pitch it,” said Carolyn Reilly of Elder Law & Advocacy in San Diego. “They’re just plain lied to by the masters.”

Homeowners usually sign up on tablets with an e-signature, without receiving hard copies or disclosure forms normally associated with a home loan. “Even when they are given paperwork, it’s not clear at all,” said Public Counsel’s Anderson. “That fact was brought home when I, an attorney working on this for a year, go to find the repayment amount, and have trouble finding it.”

Greg Frost, a spokesman for Renovate America, said homeowners can request copies of anything they sign, and that the expedited process helps those in emergency situations who don’t want to wait weeks for approved financing. “We do customer satisfaction surveys, and the levels of satisfaction are around 90 percent,” Frost said, while conceding that only those who fill out the surveys are counted. VICE asked to see the surveys but was told they were conducted over the phone. Renovate also denied suggesting a false military connection, including by calling its PACE option the HERO program, which might suggest that it’s affiliated with the military and that most of its workforce are veterans.

Some of these “energy-efficient” upgrades are of dubious value, like the replacement of interior doors, which does not affect energy usage in the home whatsoever. Other contractors offer “cool coat” paint that they claim saves on air conditioning costs, even as its usefulness has been questioned. The paint retails for as low as $57.99 a gallon, yet lawyers have alleged charges in the tens of thousands for simple paint jobs with no proven savings.

Leonard McBean’s case is a good example. “I’ve talked to several electricians, there’s no way a 1100 square-foot house should be $18,000,” said Carmen Hill, a counselor with the Harambee Housing Information Program who reported McBean’s case. “The contractor said, ‘You don’t know all the work I had to do.’ He said, ‘I tore up walls. ‘ [Electricians said], 'You don’t need to tear up walls to upgrade a panel.” Hill added that the contractor also claimed to have installed insulation into the walls and the attic, which McBean disputed. Ygrene Vice President Mike Lemyre said the project “met requirements for compliance, and the paperwork was in line.”

McBean, like many who regret getting involved with PACE, is elderly. A highly publicized case in Los Angeles featured Ossie Hill, an 86-year-old with dementia subsisting on less than $1,000 a month who was pushed into financing 19 vinyl windows, exterior remodeling, and a patio cover. After interest and fees, the bill came to $5,471.03 a year for 20 years, nearly half of Hill’s annual income. A collection of 29 case studies assembled by the National Consumer Law Center included similar horror stories, such as the tale of a 95 year-old Tuskegee airman and his legally deaf and blind wife, who were sold $42,800 in projects. The contractor later sued the couple after they refused to sign completion papers authorizing his payment, alleging bad workmanship.

PACE providers argue the completion papers step ensures quality of service. “We will not fund a contractor until the homeowner provides [the papers],” said Michael Middleberger, vice president of compliance for Renovate America.

But victims complained of not being informed that payments would be assessed to property taxes, or that PACE added a lien to the property. When the bill finally came, homeowners were sometimes shocked to find increases of thousands of dollars. Written advertisements obtained by Legal Aid of San Diego’s Alysson Snow and reviewed by VICE stated, “Investing in solar DOES NOT increase your property taxes,” when that’s precisely the method of payment. Ygrene said that would not be “an appropriate or approved communication.”

These contracts often contain prepayment penalties, meaning homeowners can’t pay off the assessments early and reduce the total interest charged. The tax assessments stay on the property until paid off, making homes harder to sell. Most banks avoid PACE-assessed homes, and new buyers can be reluctant to take on far higher property taxes, despite the energy upgrades. The lien typically takes top priority, so even if homeowners are up to date on their primary mortgage, they could get kicked out for missing property tax payments. That part even has bankers, unlikely allies to public-interest lawyers, up in arms. “This allows a private consumer credit transaction to effectively jump my lien position, using the power of local government,” said Pete Mills of the Mortgage Bankers Association.

Defaults have been rising on PACE projects, and while providers insisted they haven’t pursued foreclosure on anyone, they’re not the only ones with that authority, as counties can initiate foreclosure for missed property taxes. Plus, attorneys cited cases where defaulted homeowners gave up and left the properties, as well as at least one case where a mortgage lender paid off the property tax assessment, and immediately put the homeowner into foreclosure.

Virtually everyone involved in making these deals is protected—except the homeowner. Contractors get paid upon completion of work, and providers can sell securities to recoup their profit. County governments, meanwhile, can assess large tax penalties or take over the property if taxes go unpaid. Despite this security, PACE carries far higher interest rates than home equity loans, from 10 percent to as high as 26.99 percent. “It’s a high-cost loan with no risk to the investor and all the risk to the person,” said Snow, the San Diego Legal Aid lawyer.

For their part, Renovate America and Ygrene both described a thorough pre-screening of contractors, sales training to ensure honest dealing, an initial probationary period with extra contractor scrutiny, and investigations into complaints of unscrupulous conduct. But attorneys said providers merely document violations rather than provide restitution to homeowners. Ygrene’s Lemyre insisted the company has occasionally ripped up PACE contracts due to fraud or misrepresentation, though that was rare among the 50,000 projects the company has completed.

More recently, in response to complaints, Renovate America initiated a third-party review of its practices, and a contractor rating system they said resulted in halting business with over 100 out of 7,000 approved contractors. But Renovate has also resisted audit requirements to prove the upgrades save homeowners money, claiming that would slow down the process. Lemyre said Ygrene encouraged homeowners to do the audits themselves and shop around for the best bid, but not “prescribe whether they should do certain measures.”

Of course, this is all effectively self-regulation. Counties that earn revenue from the programs have been reluctant to shut them down, though Bakersfield, California did so recently. “These counties have been doing quite well with PACE,” said John Rao of the NCLC. And environmentalists still see the programs as promoting clean energy. “I think PACE program can be reformed in way that’s beneficial,” said RL Miller, head of the California Democratic Party’s environmental caucus and president of Climate Hawks Vote, an advocacy group. “I could see the potential for abuse, but at the same time, so many well-meaning good people fought for a good program.” And a study published in Applied Energy earlier this year was generally bullish on the program's cost-effectiveness in promoting solar energy in the state.

“It could be a problem to keep this house.” Leonard McBean

The Golden State has also taken steps to reform the program, amending PACE in October by adding requirements that companies check borrower income before approving financing and prevent kickbacks with contractors. The new rules go into effect in April, and Renovate said they want to use them as a model for other states. But attorneys argued the bills, which the providers endorsed, come with too many loopholes. And patchwork state protections traditionally give financial companies incentives to shop around for the most favorable state to operate in; the credit card industry is a good example. “There were bad actors in the past, but we’re saying please regulate, we want a level playing field so there isn’t a race to the bottom,” said Renovate spokesman Greg Frost.

The FBI has been investigating Renovate America’s practices, though the company insisted it is not the target, claiming the probe involved a rogue contractor. The diffuse layers of responsibility make it hard to police or litigate the parties involved. Some attorneys in California have gone after contractors through a state licensing board, but that means companies like Renovate America or Ygrene aren’t brought into the case.

The watchdog with the most power to implement real oversight is a federal one: The Consumer Financial Protection Bureau. But the CFPB has thus far not gotten involved, at least in part for an obscure technical reason. In 1969, according to NCLC’s John Rao, the Federal Reserve determined that tax assessments weren’t loans, and therefore didn't require compliance with regulations like the Truth in Lending Act. CFPB has never changed that guidance; the agency doesn’t even take formal complaints on PACE.

“Their silence is killing cases,” said Snow, the legal aid attorney. Pete Mills of the Mortgage Bankers Association likewise stressed that CFPB usually “doesn’t have a problem asserting broad jurisdiction,” but lamented they won’t regulate PACE as a mortgage. “They look in every respect like a consumer credit transaction,” he told me of these projects. An IRS ruling even confirmed that interest on some residential PACE assessments was deductible as home-mortgage interest.

David Mayorga, a spokesman for CFPB, declined to offer any information about PACE. And the agency has been dealing with an identity crisis in recent weeks. Both Deputy Director Leandra English and Office of Management and Budget Director Mick Mulvaney have laid claim to the role of acting director; English lost a bid to unseat Mulvaney, but the matter is still under appeal. While that gets resolved, it’s highly unlikely the CFPB has any capacity to embark on a new regulatory initiative. A bill moving through the US Senate would direct CFPB to consider creating federal underwriting requirements for PACE, and Renovate America and Ygrene expressed support for the measure. But does anyone expect Donald Trump’s handpicked foot-soldier, a guy who sees the agency as “a sad, sick joke,” to take that on?

Meanwhile, low-income homeowners who feel tricked by the program are in the lurch. And with companies interested in expansion, both in locations and in types of work (in Florida, PACE has been applied to home protections against hurricanes), more people could suffer the cruel, ostensibly environmentally-friendly fate of Leonard McBean.

“It could be a problem to keep this house,” said McBean, who has been trying to reduce his payments but feels trapped by the PACE contract. “I have nowhere to go. I cannot live on the street. I need to hold on to what I have.”